The Magic Of Revisions: How That Abysmal “Snowfall” Quarter Of 2015 Became 3.2% GDP

Remember when in January of 2015, after a bout of heavy snowfall and cold weather across, everyone was certain that Q1 GDP would be a disaster? If not, here is a reminder from the WSJ:

Brace for blizzards and other bad weather to hit the economy again this winter, though perhaps not as deeply as last year. The forecasting firm Macroeconomic Advisers on Thursday said heavy snowfall pounding the Northeast and parts of the Midwest will subtract 0.4 percentage point from gross domestic product growth in the first quarter. Last year was much worse, with a barrage of bad weather across a wider swath of the country taking an estimated 1.4 percentage point off growth in GDP, the broadest measure of economic output.


“The major snowstorms that hit the Chicago and Boston areas earlier this month yielded larger contributions to the snowfall index than did any snowfall totals in any county last February,” the firm said in a note to clients. “But outside of these areas, every other county’s contribution in the top 100 is lower this February than last February…at least given our assumptions for the balance of the month.”

This is what Forbes said at the time: “many economists and investors are pointing to snowy winter weather as the root of the weakness.”

And, as predicted, all these prediction came true because on April 29, 2015, when the BEAR released its first estimate of Q1 GDP, it said the US economy grew only 0.2%?

The number was so bad, it prompted the BEA to unleash the infamous “double seasonal adjustment” to eliminate residual seasonality – i.e., stuff that should already have been ignored due to the original seasonal adjustments.

Looking back, however, we can now revise the statement, because all those doom and gloom predictions came true “at the time” as today, as part of its Q2 GDP release, the BEA also released its annual revision of National Income and Product Accounts.

What it shows is comic: while we already noted the broad based revision to the data, which resulted in a downward revision to GDP prints from Q3 2016 through Q1 of 2017, it was the “snowfall” quarter of 2015 that drew our attention. In the best example of revisionist economic history we have encountered in years, the BEA has completely forgotten all those worries about cold weather, which readers may recall prompted the Fed to push back on its fledgling tightening intentions in the start of 2015 worried about economic strength. And as a result, following a slew of revisions, what was originally a weather-crushed 0.2% GDP quarter is as of this moment, a nice and balmy 3.2%.

And that’s why all economic data is absolutely meaningless.

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